U.S.

Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

July 27, 2005 CCPA2005-1NA

Dear Name*,

This in response to your letters of May 20 and October 21, 2004, addressed to Kristine Iverson, Assistant
Secretary for Congressional and Intergovernmental Affairs, on behalf of your constituent, Name* of
Name*. The Employee Benefits Security Administration of the U.S. Department of Labor referred to the
Wage and Hour Division Name* complaint that the Name* Circuit Court violated the Consumer Credit
Protection Act (“CCPA”), 15 U.S.C. 1671 et seq., by ordering, as part of Name* divorce settlement, that
all of his “commission income” be garnished.

Name* indicates in his correspondence that the “100% garnishment” of his “commission income” was
carried out by a court-appointed receiver of his property and assets. In this regard, Name* submitted
with his correspondence a copy of an April 10, 2000, letter from the receiver, Name*, to Name*. In the
letter, Name* directs the firm, pursuant to the Circuit Court’s Order Appointing Receiver, to transfer to
him “all funds being held” by the firm and “any future monies that would be otherwise disbursed to
[Name*].” Name* asserts that this action violated the garnishment restrictions of the CCPA .

Title III of the CCPA (copy enclosed), limits the amount of an employee’s disposable earnings that may
be garnished and protects an employee from being fired if pay is garnished for only one debt. The Wage
and Hour Division administers Title III. This Division has no other authority with regard to garnishments.
Questions over issues other than the amount being garnished or termination should be referred to the
court or agency initiating the withholding action.

Section 303 of the statute, 15 U.S.C. 1673(a), provides, subject to certain exceptions not pertinent here,
that the maximum part of an individual’s aggregate disposable earnings for any workweek that is subject
to garnishment may not exceed 25 percent of his disposable earnings for the week or the amount by
which his disposable earnings for that week exceed thirty times the current minimum wage established by
the Fair Labor Standards Act, 29 U.S.C. 201 et seq., whichever is less.

Section 302 provides the pertinent statutory definitions. Section 302(a) defines the term “earnings” as
“compensation paid or payable for personal services, whether denominated as wages, salary,
commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement
program.” 15 U.S.C. 1672. Section 302(b) defines “disposable earnings” as “that part of the earnings of
any individual remaining after the deduction from those earnings of any amounts required by law to be
withheld.” 15 U.S.C. 1672(b). Section 302(c) defines “garnishment” as “any legal or equitable procedure
through which the earnings of any individual are required to be withheld for payment of any debt.” 15
U.S.C. 1672(c).

Courts have further explained the statutory terms. In Kokoszka v. Belford, 417 U.S. 642 (1974), the U.S.
Supreme Court held that the terms "earnings" and "disposable earnings" are generally limited to periodic
payments of compensation. The Court emphasized that Congress' goal in the CCPA was to “regulate
garnishment in its usual sense as a levy on periodic payments of compensation needed to support the
wage earner and his family on a week-to-week, month-to-month basis.” Id. at 651. Thus, the Court
affirmed the appellate court’s determination that a tax refund was not “earnings” or “disposable earnings”
under the CCPA.

Also, in Usery v. First National Bank of Arizona, 586 F.2d 107 (9th Cir. 1978), then Judge Kennedy, writing
for the U.S. Court of Appeals for the Ninth Circuit, held that the CCPA’s garnishment restrictions do not
apply to banks and other financial institutions that are in possession of a debtor’s monies, even though
the sums may be traceable to earnings. The Act’s restrictions are limited to garnishments served on the
debtor’s employers or those who stand in the position of employers by virtue of paying or owing
compensation for services to the debtor. The CCPA does not apply to an employee’s bank accounts
comprised of earnings already received by the employee. See, e.g., Long Island Trust Co. v. U.S. Postal

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 U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

Service, 647 F.2d 336, 342 (2d Cir. 1981) (CCPA has no application to assets other than earnings before
they are paid out by the employer). See also, Guidry v. Sheet Metal Workers International Association,
10 F.3d 700, 715 (10th Cir. 1993) (assuming, without deciding, that the protections of the CCPA do not
extend to earnings that have been received).

Consequently, while the statutory definition of “earnings” expressly includes compensation denoted as
“commission,” absent information that Name* “commission income” was held by Name* as his
employer (or as one who stands in the place of an employer) and was compensation for personal
services payable on a periodic basis, such monies are not protected by the garnishment limitations of the
CCPA.

Name* may contact our Name* district office, located at Name*, telephone ****, fax. **** to discuss his
situation in greater detail.

Sincerely,

Rosemary E. Sumner
Office of Enforcement Policy

Enclosure: CCPA

* Note: The actual name(s) was removed to preserve privacy in accordance with 5 U.S.C. 552 (b)(7).

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